Be Prepared! New Off Working Payroll Rules - From 6th April 2020
Why should I be concerned?
If you supply your personal services to medium/large businesses through an intermediary, please be aware of the new off working payroll rules (also known as IR35) that are coming in.
From 6th April 2020 it will now be up to the end client to decide if IR35 applies - and if it does to deduct the tax and NI due.
This was introduced into public sector contracts in April 2017 and there have been some important consequences to note. Some businesses are (wrongly) operating a blanket policy of putting everyone on the payroll regardless of their individual circumstances. This can leave true contractors out of pocket since they are suffering additional NI and no longer have the flexibility of whether/how to extract funds from their limited companies.
Therefore even if you don't think IR35 will apply to you, please be aware of the changes in case you are inadvertently caught up in them.
How do I know if I should be operating within IR35?
This is a complex area and will depend on each individual contract in place and the working relationship that goes on in practice. In practice, if you didn't operate through an intermediary - would you be seen as an employee of the client.
Some of the things to consider are:
Mutuality of Obligation
Supply of equipment/insurance cover
What happens if I should be operating within IR35?
If you are working for a medium/large client, then there are certain steps that need to be followed:
You should receive a Status Determination Statement before the contract starts, which tells you why you have been assessed as such (if you don't receive this - then the client is responsible for any tax due)
You will then be put on the client payroll, and tax and employee will be deducted from your invoiced amount (note that the client should be responsible for the employers NI - ensure your contracts make this clear before you start as there have been some instances where this has also been deducted)
You will receive the net amount into the company, and this can then be extracted as tax free salary (the salary will be assessed personally on your year end self assessment using figures from the P45/P60 you should receive from the client)
If you have some contracts inside and some outside IR35, then you need to ensure that systems are in place to correctly identify these.
If you don't agree with the assessment, you can apply in writing to appeal, the client has 45 days to reply - in practice it is unclear how useful this appeal is going to be as there is currently no independent reviewer.... we are awaiting further guidance which should be issued before the end of March.
If you are working for a small client - then the onus is on your personal service company to operate IR35 as has always been the case - there are no changes.
What can I do now to minimise the risk of being incorrectly assessed under IR35?
It is recommended that a thorough review of your contracts is undertaken, to ensure it is made clear that your working relationship is outside of IR35, and get confirmation in writing from clients before work commences of your worker status.